Bonus

AAA

DEFINITION of 'Bonus'

1. Additional compensation given to an employee above his/her normal wage. A bonus can be used as a reward for achieving specific goals set by the company, or for dedication to the company.

2. Dividends paid to shareholders from funds created out of additional profits realized by the company.

3. A premium paid for accepting an agreement. Sometimes referred to as a "signing bonus".

4. Anything over and above what is expected.

BREAKING DOWN 'Bonus'

1. Bonuses can add up to the majority of some employees' compensation. For example, Goldman Sachs CEO L. Blankfein received $68 million in cash and stock as a 2007 bonus, but only made $600,000 in salary. Due to these high amounts, corporate compensation is public information in public companies.

2. These bonus dividends are paid to specific shareholders. The board of directors would approve payment, and can also decide to stop dividends at its discretion.

3. Signing bonuses are used as an incentive to obtain employees or contracts. The initial payment is designed to entice the signing of an agreement that will cost the company more now for higher future benefits.

4. A realized benefit that was not intended or planned.

RELATED TERMS
  1. Dividend

    A distribution of a portion of a company's earnings, decided ...
  2. Performance Bonus

    A form of additional compensation paid to an employee or department ...
  3. Pay Czar Clause

    A buzz word describing a clause found in financial institutions' ...
  4. Golden Parachute

    Substantial benefits given to a top executive (or top executives) ...
  5. Bonus Issue

    An offer of free additional shares to existing shareholders. ...
  6. Stock Compensation

    A way corporations use stock options to reward employees. Stock ...
Related Articles
  1. Investing Basics

    How And Why Do Companies Pay Dividends?

    If a company decides to pay dividends, it will choose one of three approaches: residual, stability or hybrid policies. Which a company chooses can determine how profitable its dividend payments ...
  2. Professionals

    How To Make $1 Million In Finance

    The best opportunities to maximize sheer earning power are in investment banking, private equity and hedge funds. Find out what it takes to succeed in these ultra-lucrative areas of finance. ...
  3. Investing Basics

    Dividend Facts You May Not Know

    Discover the issues that complicate these payouts for investors.
  4. Personal Finance

    Common IRA Rollover Mistakes

    Avoid paying excess taxes by learning some simple transfer rules.
  5. Professionals

    6 Employment Perks And How To Get Them

    Find out how to get more than money from your employer.
  6. Options & Futures

    A Guide To CEO Compensation

    Make sure you assess whether a CEO has a stake in doing a good job for you, the shareholder.
  7. Options & Futures

    A Close-Up On Gross Ups

    Learn about this hidden perk and why it's often bad news for investors.
  8. Term

    What is a Preemptive Right?

    A preemptive right allows select shareholders to buy newly issued shares in their corporation before the general public.
  9. Personal Finance

    How To Get That Entry-Level Financial Analyst Job

    Landing a job as a financial analyst takes study, strategy and a lot of hard work. Here's how to hone your competitive edge.
  10. Entrepreneurship

    Top 10 Side Jobs You Could Start Now

    Ways to make extra cash in your spare time.
RELATED FAQS
  1. What protections are in place for a whistleblower?

    Whistleblowers can play a critical role in ensuring the compliance, safety, honesty and legal fairness of governments and ... Read Full Answer >>
  2. What is the difference between AGI (adjusted gross income) and gross income?

    In the United States, individuals pay taxes based on their adjusted gross income, or AGI, rather than their gross income. ... Read Full Answer >>
  3. Does my employer's matching contribution count towards the maximum I can contribute ...

    Contributions to 401(k) plans come from employee salary deferral and employer match dollars. According to the IRS, employees ... Read Full Answer >>
  4. How is marginal propensity to save calculated?

    Marginal propensity to save is used in Keynesian macroeconomics to quantify the relationship between changes in income and ... Read Full Answer >>
  5. How do modern companies assess business risk?

    Before a business can assess or mitigate business risk, it must first identify probable or likely risks to its bottom line. ... Read Full Answer >>
  6. Why has emphasis on corporate governance grown in the 21st century?

    Corporate governance refers to operational practices, management protocols, and other governing rules or principles by which ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  2. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  3. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  4. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  5. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  6. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!